Matt Miller: Medicare plan is fascinating policy, politics

The new Wyden-Ryan Medicare framework is the most fascinating policy and political maneuver of the year. Here’s why.

First, the original Medicare plan by Rep. Paul Ryan, R-Wis., was to be the centerpiece of the Democrats’ 2012 campaign, featuring all the predictable cries that the GOP was tossing Grandma off a cliff. By making sufficient adjustments to his plan to draw the cooperation of Sen. Ron Wyden, D-Ore., Ryan has plausibly inoculated his party against a “Mediscare” campaign. Or at least he gives Republicans a credible rebuttal. After all, Wyden got into politics as the founder of the Oregon chapter of the Gray Panthers. The man has been a champion of seniors for 35 years.

For Wyden’s part, he has bravely chosen to incur the wrath of his fellow Democrats for having blunted their demagogic spear. But he’s right to do so because, if handled correctly, premium support may well be part of the answer to Medicare’s long-term woes. Wyden has always been one of the few senators focused on big, creative, bipartisan solutions; the Wyden-Bennett bill, for instance, would have moved us sanely beyond our archaic employer-based health system. It was always the best of the health-reform plans offered.

In this new plan, Wyden gets Ryan to sign onto a key component of that earlier reform, although it has nothing to do with Medicare. Wyden-Ryan would allow firms with fewer than 100 employees the option of giving their workers (on a tax-advantaged basis) the cash the firms would have spent on their health coverage; with this, employees can buy, voucher-style, other policies. Since most small firms offer just one health plan, this is a huge victory for choice. It means that as many as a third of U.S. workers could use the new health care exchanges.

But there’s more. With this new plan, Ryan has signed onto the idea of subsidizing people to buy coverage from well-regulated health exchanges that must take all comers and charge them similar premiums regardless of health status. If that framework sounds familiar, it should — it basically describes the dreaded “Obamacare.”

And here’s the kicker: Wyden-Ryan has a public option to boot, because fee-for-service Medicare would remain an option for seniors. Ryan is thus now on record for the Affordable Care Act model, with a public option. But just for seniors. Oh, and for workers at small firms, accounting for a third of America’s total employment.

There’s still more. The arcane yet crucial change from Ryan’s previous model is that the annual growth rate for vouchers would be based on nominal gross domestic product plus 1 percent. In his original plan it increased yearly only by the rate of inflation, which is much less, especially when compounded over time.

But Ryan chose that path for a specific political reason: Given that tax increases were off the table in his budget as a matter of ideology, it was the only way to show enough long-run budget savings so he could claim his plan would balance the budget eventually, by 2035.

I always wondered what would have happened if Ryan had gone with a more generous voucher. Now, with Wyden, we’ll see.